State Estate Taxes May Run Off Elderly Taxpayers
One backlash in the fight over estate tax repeal is states
instituting state estate tax legislation. However, the Wall Street Journal
reports, states thinking about doing this might want to think twice.
Connecticut is a good example. Republican Governor Jodi Rell
recently signed into law a tax bill requiring any resident who dies with
an estate worth more than $2 million to pay an inheritance tax of up to
16%. A wealthy elderly resident need only move to a state without an estate
tax to avoid having their estate payout to the government as well as to
their heirs after they die.
Considering wealthy elderly residents are likely to already
own a vacation home in a state such as Florida (where there is a prohibition
to estate taxes in the state constitution), moving their state of residence
will not be much of an inconvenience compared to their estate's loss
of money if they choose to stay.
In 2004 the National Bureau of Economic Research performed
a study which showed states may lose as much as a third of their estate
tax revenues to wealthy elderly individuals changing their state of residence
to avoid estate taxes. This doesn't even take into account the loss
of revenue from other state taxes and the damage done to a state's
economy when its wealthiest residents decide to take their business elsewhere.
At the end of the day, states with their own estate taxes may have to face
the harsh fact that, a resident who doesn't want to die in your state
doesn't want to live there either.
Source: Wall Street Journal, 8-1-05
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